Economists should sometimes think like nano scientists. Very small particles of a substance often behave quite differently to larger chunks. So too the US economy. While it appears to be recovering in aggregate, many small businesses are suffering an entirely different experience. Measures of small business sentiment are at odds with the most recent quarterly “advance” reading of a healthy 3.5 per cent growth in gross domestic product.
The National Federation of Independent Business survey indicates that confidence remains well below the long-term trend. As statistics relating to large companies are easier to collect, they may feature more heavily in initial estimates for output than the small companies that contribute 17 per cent of GDP.
If so, it suggests the statistics for third-quarter output could be subject to significant downward revisions – by 0.5 to 1 percentage points, calculates Goldman Sachs.